A recent study by the Tower Group, a Wellesley, MA based research consulting firm, reports that more than 400 financial institutions nationwide have already adopted image statements. There are many reasons why image statements are usually the first imaging solutions banks implement. Image statements are monthly bank statements in which imaged representations of checks and deposit slips replace the actual checks. Image statements appeal both to banks and to banking clients.

Customers like image statements because they are compact, visually appealing, and simplify balancing the checkbook. Checks and deposits appear in numerical order, making it easier to reconcile accounts. Gone are the days of shuffling and rearranging piles of checks. They are depicted next to the dollar amounts, making it easier to catch discrepancies.

An imaging system must capture both sides of each check and the accompanying deposit slip if the bank plans to destroy the originals. At month's end, the system retrieves the check images for each account and prints them in order on the statement. The printing process is automated, making it a simple matter to create individual statements for each customer.

Image statements sent to customers with personal checking accounts typically include just the front of the check, assuming that is all the customer wants to see. Image statements for commercial accounts, on the other hand, usually include both sides of the check. Including images of the deposit slips on the statement is another option. A typical statement format displays twelve checks per page.

Since all the printing is under computer control, however, it is relatively easy to create custom formats for special customers. For example, many banks print checks in a two checks per page enlarged version for visually impaired customers.

Banks like image statements because they are cheaper to prepare and cost less to mail. The biggest cost savings from the bank's perspective is that check-item research is much faster and cheaper Once check images have been captured and saved in computer storage, checks can be retrieved for customers in seconds. Goodbye to the five minute microfiche lookups and the calls to the records department to have them fax you copies of the checks.

Banks need to rethink postal methods when they move to image statements. Different postal handling equipment may be needed to stuff the new lighter, flatter image statements. In addition, to achieve the lowest pre-sort postage rate, the bank must have at least 500 mailing pieces. Small banks may need to change or combine statement cycles to achieve this number.

Resistance to image statements has not been vigorous, according to Tom Houston, a certified imaging consultant and president of Atlanta-based Cabbage Mountain Image Consultants. "Interestingly, hold-outs tend not to be senior citizens but baby boomers in the 35 to 45 age group," Houston observes. He advises banks not to knuckle under to customer demands to keep their paper checks.

You might call it Houston's fundamental rule of image statements - don't offer a choice. "The most important marketing rule a bank must follow when introducing image statements is don't let your customers choose," says Houston. "Every successful and unsuccessful bank has validated this rule. All interactions and correspondence with customers should emphasize the many benefits of check images. Banks that stick to the hard-line of 'this is the new system, it is better and the only option' find that they lose a minuscule number of customers. Banks that offer customers a choice of paper or image statement invariably regret this decision."

Houston admits that not every bank he advises follows this rule to the letter. Rather than lose a few customers, some banks knuckle under and make exceptions, mailing out checks to those few who seriously look like they would otherwise defect to another bank. Doing so causes a lot of extra work for the back office and, unless the account retained is a really large one, rarely makes good financial sense.

"Once you have captured check images, you will find there are all kinds of services that can be spun off to generate fees. CD statements are the best example of such a spin-off product," says Thierry Leger of IA Corp.

Dealing with large volumes of paper checks is a real pain. That's why corporate customers love CD statements so dearly. CD statements take the work done to create image statements one step further. Why print the image statement for the corporate customer when you can provide them with a CD full of indexed check images? Each image is indexed with all the data that is provided on the MICR line of the check. This allows bank customers to search for data and images by categories such as check number, item amount, date, and customer name. That way, the corporation can print own statements or it can use the CD as a research tool to search and sort through the image statement any way it likes.

Using current CD-R technology, it costs a bank about $10 per disk to print a single custom CD. That puts CD statements out of the reach of the home banking market, but well within a corporate budget. CD statements are often listed as potential moneymaking propositions, but most banks give them free of charge to corporate customers as a relationship banking item.